ICSC CONFERENCE Europe has become a 'compelling proposition'

'The restrictions around the right to build stuff in Europe has confused me and it's a little slower here in terms of approval, but as an owner, it means you don’t have all this supply that could hurt existing projects. It's been a really good experience. There are always differences, operators in the US are probably a little more aggressive about running their properties than in Europe, but it's on the margin. There are a lot of good operators here. It's not quite as aggressive, but it's not the end of the world. Frankly, it's on the margin.'

Commenting on the shopping centre product that has been built outside the US, Simon said this was more impressive than in his home country. ‘It's an evolution not a revolution, we're seeing more diversity and mixed uses. Historically, food presentation over here has been better than in the US. But tenants are not as good over here as in a suburban US mall. You can learn from all of these folks. There will be more food and beverage in the future, leisure activities and services to make them stay. But there's not just one formula that makes it all work. There’s no equation for success.'

The US does have a more entrepreneurial model where businesses are a little more 'tenacious', he said. 'US operators tend to have deeper relationships with their tenants. In the US you are doing the deals yourself as an operator, so you get a better understanding of your clients. That's different to the UK model which is more brokerage led.'

A Klépierre product, not a Simon product
In Europe, Simon has a sizeable stake in French retail property REIT Klépierre, but the US group is not running the business, he said. ‘We are giving them some strategic oversight, and they are using that in their own capacity to make their product better. It's got to be a Klépierre product, not a Simon product.'

As for the group's stake in outlet centre operator McArthurglen, Simon said 'we're just along for the ride. Their product is authentic for what they are building; they’re doing a great job. If we can help on the margin, we’re happy to do so.'

Asked what the biggest changes have been in the retail landscape in the past few decades, Simon said the level of sophistication retail property companies has increased significantly. 'The product and tenant mix and the look and feel of properties are really improved. The operating expertise of companies has also gotten much better over the years. I ascribe that to the fact that so many companies are public and to the discipline that goes along with that.'

One notable area where US retail property companies have become more disciplined is in the area of supply and demand, Simon said. 'In the past the motto was build and they will come, but we've all become better operators. We’re also more sophisticated in how we deal with clients.'

Historical reliance on department stores
One area where western retail landlords are still struggling is with is their historical reliance on department store to create traffic, Simon said. 'That equation has certainly changed in the last years. They're no longer driving as much traffic as we had counted on.'

Commenting on authenticity, Simon said this remained a challenge. 'I think it's hard. Our business is so out and front. A great mall will be copied pretty quickly.' He conceded that a significant complaint in the mall business is that if you've been to one, you’ve been to them all. 'A mall has to have some kind of authentic feel for the consumer; it has to feel different in Toledo from Houston.'

'The best way to be authentic is through service, but you need economies of scale to do that in a way that doesn't kill you financially. We need to marry service levels with malls so that they’re not the same across the board. It's a huge challenge. It's very hard to do.'